Kenanga Research has foreseen Malaysia’s logistics sector to ride on e-commerce boom.
The research house said in its recent report that the booming e-commerce will spur demand for distribution hubs and warehouses to enable just-in-time (JIT) delivery, reshoring/nearshoring to bring manufacturers closer to end-customers, efficient automation system, including interconnectivity with the customer system, and warehouse decentralization to reduce transportation costs and de-risk the supply chain.
There is also strong demand for cold-storage warehouses on the back of the proliferation of online grocery start-ups, it added.
According to Kenanga, the domestic logistics sector fared better as Malaysia total trade soared 6.2 percent as of year to date-May 2025 (trade surplus of 46.9 billion [$11.04 billion] as of May 2025), especially in the domestically driven third-party logistics (3PL) sector (on-shoring business trend), which is less vulnerable to external headwinds, being buoyed by booming e-commerce.
Industry experts project the local e-commerce gross merchandise volume to grow at a compound compound annual growth rate (CAGR) of 7 percent from 2023 to 2027, reaching MYR 1.9 trillion ($447.33 billion) by 2027 from MYR 1.4 trillion ($329.61 billion) in 2023.
However, Kenanga noted that local players are also faced with intense competition from Chinese players which limit local players ability to fully leverage on Malaysia’s strong total trade growth.
This situation occurred due to the irrational pricing set by Chinese logistics players despite the rising logistics operating costs (manpower and stricter weight limit regulation) and Chinese logistics players typically coming in as a package from the new entrant of China foreign direct investment (new plants).
Kenanga also expects domestic logistic sector growth to remain steady going into 2026, which is a beneficiary of the booming e-commerce, supported by the global tech up-cycle led by artificial intelligence (AI) demand, a resilient US
economy, potential trade diversion amid US-China trade tensions and short-term surge in domestic ports’ container volume on frontloading activities within the period of US tariff pause negotiation.
The World Trade Organization (WTO) cited earlier an emerging trend of connecting economies or countries that benefited from the trade diversion on US-China trade tensions.
Malaysia, Singapore, India and Vietnam growth is surging due to their emerging role as “connecting” economies, trading across geopolitical blocs, thereby potentially mitigating the risk of trade fragmentation.
Based on the Malaysia’s external trade February numbers, it noted there was an export increase to the US (28.9 percent versus Jan’s 28.1 percent) with the US now Malaysia’s second largest export destination (after Singapore, with China on the third place).
Presently, the US is now Malaysia’s second largest export destination (after Singapore) which we believe is due to trade diversion, trade frontloading, and China’s slowdown in economic growth (US started to overtake China in the second place since mid-2024).
Overall, Malaysian ports’ container growth volume is expected to remain in single-digit due to the China’s projected slower growth in 2025 (the International Monetary Fund [IMF] projected China’s economic growth to slow down to 4.5 percent from 5 percent in 2024), but partially offset by the potential trade diversion amid US-China trade tensions.
Kenanga also acknowledged that stricter regulations on carbon emissions may pose new challenges to global trade, particularly, one from the United Nations’ International Maritime Organization (IMO) and another from the European Union (EU).
While the exact implications of the regulations of the IMO and EU’s Carbon Border Adjustment Mechanism (CBAM) on the seaport and logistics sectors remain unclear (especially for Carbon Border Adjustment Mechanism [CBAM] which is still pending finalization and to take effect by 2026), the volume of containers heading to the EU will certainly be affected (about 18 percent of container throughput under Asia-Europe trade).
This is especially so for those originating from China, which is a major exporter of iron, steel and aluminum to the European Union, said the research house.
Under the new IMO rules, effective January 2023, all ships must report their carbon intensity and will be rated accordingly.
The ships must record a 2 percent annual improvement in their carbon intensity from 2023 through 2030 or face being removed from service.
Meanwhile, the EU’s CBAM policy could disrupt the exports of certain commodities (iron and steel, cement, aluminum, fertilizer, electricity, hydrogen) to the EU.
During the transition period between October 2023 and December 2025, EU importers must report embedded emissions in goods imported on a quarterly basis, as well as any carbon price paid to a third country.
When the CBAM takes full effect starting 2026, importers will need to buy carbon credits reflecting the emissions generated in producing them, according to Kenanga.